ABSTRACT
In order to appreciate the difference between the valid measures of gain such as consumer surplus or rent, and the spurious measure of gain, producer surplus, let reader follow standard textbook procedure and assume, first, that all firms in the particular industry are of equal size and efficiency. Since real rentals rise and – unless there are increasing returns to scale – real wages fall as the output of good x is expanded, readers are able, under particular monetary assumptions, to calculate the rise in money rentals and the fall in money wages corresponding to increased amounts of capital and labour required by some given increase in the quantity of the product x. Essentially, producer surplus is not to be included as it is mere pecuniary profit and does not arise from any scarcity rent. Anything that increases profit whether government or firms arising from increases in price must take into account whether this comes from real changes in supply curve.
